UK Offshore Tax Amnesty Flops

09.08.2010

According to figures released by the UK tax authority, HM Revenue and Customs, as of March 31, 2010, just 419 taxpayers had registered for the Liechtenstein Disclosure Facility.

Commenting on the findings, Phil Berwick, Director of Tax Investigations at UK-based law firm McGrigors, said: “It is surprising how few taxpayers have [so far] registered for the LDF. Many more probably would have done so, but many are unaware that they qualify, or even that the LDF exists. There has been a poor response to recent HMRC disclosure initiatives, and this is no exception.”

HMRC launched two tax disclosure facilities for UK taxpayers with undeclared income and capital gains in offshore bank accounts last year, the New Disclosure Opportunity (NDO) and the LDF.

While the NDO has now closed, the LDF remains open until March 31, 2015, and offers more favourable disclosure terms. Under the LDF taxpayers will be required to pay tax, interest and, in most cases, a fixed 10% penalty but only need to come clean just for the period from April 1999. In addition, the LDF offers immunity from prosecution, but for tax fraud only.

Taxpayers with undeclared income or gains in an offshore bank account, or offshore investment vehicle, qualify for the LDF providing that offshore account, etc was not opened through a UK branch or agency. To participate in the LDF, the taxpayer needs to open a bank account in Liechtenstein.

Commenting on the failings of the initiative thus far, Berwick added: “HMRC are to be congratulated on releasing these figures, but they have not done enough to publicise the LDF. To release the information only twice a year, as they intend to do, will not encourage those who may be wavering to come forward.”

“The lack of advertising or promotion of the LDF by HMRC has left the responsibility to do so with professional advisers. HMRC’s stance has created an atmosphere of rumour and misunderstanding about the LDF, and meant that some advisers are reluctant to involve their clients in that process.”